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FRM-1 Study Notes

Types of Investments and Purposes

  • Asset types
    • Financial Assets: Equity, Debt securities
    • Commodities: Gold, Copper, Crude Oil
    • Real Estate
  • Let’s take an example of a financial asset (stock)
    • We can buy the stock through the broker by paying the stock price
    • We can either hold the bought asset or sell it at the current market price
    • During the holding period of the stock, the dividends received goes to your pocket as the income from
      the asset
    • After selling the asset, we earn a profit or loss on the asset, depending on the selling price of the
      asset (stock)
  • Purpose of Assets
    • Investment Asset
    • Consumption Asset
  • Market Maker
    • An individual or an institution which keeps an inventory of financial instruments or commodities who could be asked for the trade of those assets. The individual or the institution then quotes a bid and an offer price on the option

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